He was a lonely guy who wanted love. He just never knew how to express it. Deep down Louie had a heart. IMO

http://static.tvguide.com/MediaBin/Galleries/Imported/Editorial/A-B/bad-bosses/louie-depalma8.jpg

Hard to tell. Even after he was going with Zena, he still had mean streaks.

He was understood the others kept him in line.

He was a combo of both. Yes, part of his noxiousness was due to a Napoleonic complex, but I think even if lots of love and understanding had been showered on him, he still would have been unpleasant. You really had to scare Louie to keep him in line - a classic example was the ep with Louie and Zena's mother. (Think its Louie Meets The Folks)